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Retirement Plan Market Beckons, but RIAs Hesitate

Relatively few RIAs service 401(k)s and other employer-sponsored retirement plans even though the market beckons as a huge growth opportunity, according to a new study.

A recent TD Ameritrade Institutional Advisor Survey found that advisors want a deeper understanding of the rules and more guidance in pulling together components they need to service the U.S. retirement plan market.

Nearly eight of 10 survey respondents said that RIAs as a group were well-positioned to increase their share of the $5 trillion in defined contribution retirement plan assets. Market brokerages, insurers and mutual fund companies have long dominated this market.

Yet 62% of RIAs service 10 or fewer plans, including nearly 19% who work with no plans, according to the survey. Other industry research indicates that only 6% of retirement plan advice specialists are RIAs, TD Ameritrade said in a statement.

Maritz Inc. conducted a telephone survey with 300 RIAs on behalf of TD Ameritrade between Nov. 4 and Nov. 15.

The U.S. retirement market has grown to about $22 trillion, and analysts expect the market to reach $24 trillion by 2017, according to the study.

TD Ameritrade noted that Department of Labor rules that mandate greater fee transparency and changes in the definition of “fiduciary” could tilt the playing field in favor of RIAs.

The survey found that nearly half of respondents were currently directing time and resources toward the retirement business. Another 19% said they did not currently have plans, but likely would in the near future.

“RIAs recognize the retirement plan business is a tremendous growth opportunity for the industry and a chance to gather additional assets they are not capturing today,” Skip Schweiss, managing director at TD Ameritrade Institutional and president of TD Ameritrade Trust Company, said in the statement.

“There’s no denying the retirement business has more moving parts, but with a little help and guidance advisors believe they can assemble an important new growth enterprise.”

RIAs could have a substantial cross-selling opportunity when it comes to the retirement business, TD Ameritrade said. Half of the advisors surveyed said 10% or more of their clients were business owners, a group that potentially could steer their company’s retirement plan to the RIA.

The survey identified several concerns that have prevented many advisors from entering the retirement plan market:

60% cited a lack of time or resources

42% cited compliance and regulatory requirements

38% said they lacked business relationships with third-party administrators or recordkeepers

30% were not sure of the opportunity

25% said they lacked the tools needed to service retirement plans

The survey underscored that RIAs have business-owning clients and that they have the expertise to service them, TD Ameritrade said.

Still, half of the advisors said they would like to develop a firmer understanding in the areas of retirement plan compliance and regulation. More than half wanted more education about the retirement market.

Fifty-eight percent asked for referrals on which third-party plan administrators and recordkeepers they should work with, while more than a third said they wanted ongoing practice management support.

With the right support and resources, more RIAs said they would be more likely to stake a claim in the retirement market, the survey showed.

“Imagine a business where your clients add new money every two weeks, rain or shine,” Schweiss said. “That’s what the retirement plan market is, and for many advisors it remains an untapped source of new growth.”

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